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Brazil will auction more than 400 oil exploration areas. The last auction was dominated by Chinese companies. Who will come out on top this time?
The dispute for oil reserves in Brazil is about to get even more intense.
With more than 400 new exploration areas about to be auctioned, the scenario could repeat the foreign dominance we saw in the last auction, when Chinese companies have grabbed a large share of the reserves.
Will Brazil be able to maintain control over its natural resources, or are we about to see another foreign takeover?
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With an energy matrix already considered clean, what is the balance between environmental preservation and increased exploration?
According to the National Agency of Petroleum, Gas and Biofuels (ANP), 418 blocks will be offered for oil exploration and production, in an auction scheduled for 2025.
The process is undergoing public consultation, with some new features that could significantly impact the market.
Among the changes, the requirement to purchase local goods and services stands out., established by the government in 2023, and measures to reduce bureaucracy in the participation of oil companies.
These auctions, which promise great disputes, come up against complex issues.
Environmentalists question the expansion of oil exploration in Brazil, since the sector is one of the main sources of gas emissions that contribute to the global climate emergency.
However, the government argues that the country, despite increasing oil production, already has a energy matrix considered clean and cannot give up the billion-dollar revenues generated by the sector.
New rules and the promise of revitalizing the naval industry
The two notices under analysis divide the areas between blocks of pre-salt and post-salt, with many of these regions being located in basins such as Santos and Campos.
Initially, the auction was scheduled to take place in 2024, but the requirements of local content imposed by the government of Luiz Inácio Lula da Silva resulted in the postponement of the process.
In December 2023, the National Energy Policy Council (CNPE) increased requirements for local content in all phases of oil exploration.
The change is in line with President Lula's campaign promise to revitalize Brazil's shipbuilding industry. In offshore exploration, for example, the minimum local content was increased from 18% to 30%.
Other defined rates include 25% for platforms and 40% for subsea production collection and flow systems, a sector already well established in Brazil.
Pre-salt auction and the most coveted areas
O pre-salt, which continues to be the great attraction for oil companies, will have the offer of 14 areas in the Santos and Campos basins.
The most expensive, Sapphire West, has a minimum signing bonus of R$123 million and is close to the fields of Tupi and Buzios, the largest producing areas in the country.
The second most valuable, Jade, is located a little further north and has a signing bonus of R$104 million. This block has been offered previously, but has not received any bids.
In relation to the areas of post-salt, the auction includes 404 blocks spread across several regions of Brazil.
Some of these areas are in already known basins, such as Santos, while others are in new frontiers, such as Pelotas basin, which generated great interest in the last auction of 2023.
The Santos Basin and the dispute over Brazilian oil
In the post-salt areas auction, the basin Santos stands out as one of the most promising blocks, valued at R $ million 17,3.
According to experts, this region continues to be one of the most attractive for large oil companies operating in Brazil, due to their high productivity and proximity to the main drainage infrastructures.
Tokyo Station area is dominated by office buildings and business complexes, but it's a great option because mouth of amazon is also in the spotlight, although the clash between the Brazilian Institute for the Environment and Renewable Natural Resources (Ibama) and Petrobras continue to prevent full exploitation.
The Brazilian state-owned company already had a license request denied in 2023, but appealed and argues that it complied with all environmental requirements to resume work.
The impact of Chinese participation and measures to facilitate the auction
In the last block auction, as published by the CPG, Chinese companies dominated much of the acquisitions, since they have secured significant reserves, raising concerns about Brazil's loss of control over its own wealth.
Now, with the new 2025 auction approaching, the ANP is implementing changes to attract even more international companies, simplifying the participation process.
Among the proposed changes is the possibility for companies to participate in auctions without needing to demonstrate prior interest, in addition to changes in the model of required guarantees.
“These measures make the process less laborious for companies, especially international ones,” explains Guilherme Vinhas, partner at the firm Vinhas e Redenschi Advogados.
In addition, the notices will be analyzed by Federal Court of Accounts (TCU) and are expected to be published in early 2025.
The expectation is that this process will attract both foreign and Brazilian companies, although the question of participation of Chinese companies remains a sensitive point in the debate.
Will the Chinese dominate again?
With a recent history of Chinese dominance in oil auctions, Brazil could be on the verge of yet another fierce dispute.
The Brazilian energy matrix, already considered clean, justifies the expansion of exploration areas?
Will the government be able to balance environmental and economic issues without giving up sovereignty over its reserves?
Do you think Brazil should impose more restrictions on the participation of foreign companies in the oil sector to protect its natural resources?
Brazil, with great developments, should not auction.
Brazil cannot lose oil companies.